LECTURE – 1

NEW SERVICE DESIGN & DEVELOPMENT

Learning Objectives

1. To discuss the new service development process and service

design using service blueprint to align service concept with

service delivery

3.1 SERVICE DESIGN SYSTEM

• Service design process is comprised of service system elements which

form a blueprint to communicate the service concept to customers and

employees

• Service system elements can be categorized as structural and managerial

elements which should be in place to offer services that achieve strategic

service vision as shown in Figure 3.1

FIGURE 3.1 SERVICE DESIGN SYSTEM ELEMENTS

Structural Elements Managerial Elements

Service Design system

To achieve strategic service vision

Location

Quality

Information

Comprised of

Delivery System

Facility Design

Capacity Planning

Service Encounter

Managerial Capacity &

Demand

3.1.1 Structural Elements

The decisions pertaining to structural elements are of strategic in nature, which

have to be planned considering long-time horizon while designing service delivery

system. These structural elements are presented below.

Delivery System

Front & back office operations

Automation like self-service technologies

Customer participation

Facility Design

Size of facility

Aesthetics and ambience

Layout and expansion consideration

Facility Location

Customer demographics

Single versus multiple sites

Site characteristics

Service concepts and objectives of service delivery

Capacity Planning

Managing waiting lines

Accommodating average and / or peak demand

Service –line balancing

3.1.2 Managerial Elements

Once structural elements are in place, service organization take into account the

activities require personal interaction or virtual interaction with the customer as

a service encounter. It is important to consider managerial elements while

designing service which can improve customer interaction and service quality at

the same time provide hassle free service with less waiting time. Such elements

are discussed below.

Service Encounter

Characteristics of service provider, employees & customer

Quality

Reducing gaps between customer expectation and perceptions

Managing capacity & demand

Information

3.2 New Service Development

For their survival, service companies must develop new services

continuously. New service is defined as an offering not previously available

to the customers using Innovation process

New service development process is required to accommodate dynamic

requirements of customers/ market, to bring service innovations that achieve

Competitive advantage leveraging the speed of technological developments

New service development process faces challenges in terms that service

cannot have extensive R & D departments like manufacturing or processing

industry? It is very difficult to imitate or make prototype of new service and

test it in some laboratory.

New Service Development (NSD) can be demonstrated as a cycle shown in

Figure 3.2, which takes service innovation as inputs to the NSD cycle.

FIGURE 3.2 NEW SERVICE DEVELOPMENT (NSD)

3.2.1 New Service Development: Innovation

Innovation can be defined as successful exploitation of new ideas. Innovation is

must to face the challenges or competition in service due to

Low entry barriers in service

Ideas for new service innovation

Design Analyze Development Full Launch

Planning activities Execution activities

Few patent protection

Lower capital investments

Shorter service product cycles

Innovation can also be perceived as novel, useful and creative ideas that improve

effectiveness & delivered to the customers to create commercial value.

3.2.2 Challenges in Service Innovation

Services are mainly thought of consumers of innovations (mostly developed

in manufacturing sector) and Imitators of or facilitators to innovation of

manufacturing firms

Difficulties in realizing innovation in services because

Services may or may not use specific resources in the form of R&D

departments like other goods

Service innovations may be are not result of deliberate activity at all

Innovations are recognized only a posteriori as they emerge in the

process of service provision on the basis of customer’s specific needs

Service is both a product and a process and because of nature and

characteristics of services it is difficult to change or improve service.

Service organization or employees may innovate while providing

good quality service or while meeting extra ordinary client’s request,

but they may think that it is to satisfy customer and never realized that

they have actually innovated something.

3.2.3 Classification of service innovation

Service innovation can be classified as radical innovation and incremental

innovation as shown in Figure 3.3.

FIGURE 3.3: CLASSIFICATION OF SERVICE INNOVATION

3.2.4 Drivers of Innovation

Financial pressures or increased competition to decrease costs, increase

efficiency

The changing economy

Stricter government regulations

Need for sustainable development

Shorter product life cycles

Community and social expectations and pressures

Demographic, social, and market changes

Radical Innovation

Service not previously available

Example: Amazon.com

Incremental Innovation

Changes / improvements in existing services

Example: Web – check in for air travel

Service Innovation

Rising customer expectations regarding service and quality

Greater availability of potentially useful and inexpensive new technologies

New ideas from customers, strategic partners, and employees

3.2.5 Radical Innovations

In radical innovation new service system with final service product, technical and

competence characteristics replaces the old service system. It can visualize as step

change in some measure of growth like sales and efficiency. This innovation can

take following forms.

Major Innovation

New service for markets as yet undefined mostly driven by

information and computer based technology such as eBay

Start-up Business

New services in a market that is already served by existing services

such as make-my-trip, clear trip

New Services for the Market Presently Served

New service offerings to existing customers of an organization such as

ATMs at Airport

3.2.6 Incremental Innovations

Incremental innovation results due to modest changes in the existing services. It

can take different forms.

• Service Line Extensions

– Augmentation of existing service line such as new menu items in

some restaurants

• Service Improvements

– Changes in features of currently offered service such as web based

check-in services offered by airlines

• Style Changes

– Modest visible changes in appearances such as changes in aesthetics

Example: Service Innovation

Dell Computer Corporation offers same design of computers (laptops) and

utilizes similar manufacturing systems as their competitors, but they differ

significantly in terms of how they serve their customers’ needs both in terms

of sales and after sales services. Dell’s strategy of skipping the middleman

(i.e., the sales agent) and allowing customers to configure their computers to

their own requirements have kept Dell apart from its competitors and helped

build its significant market share. At the same time Dell provides online

after sales service, where engineers can interact with the customer and

rectify the problems using internet.

Example: Service Innovation

RFID (Radio Frequency Identification Device) tags are now replacing the

use of bar codes. The current process of purchasing goods using bar codes in

a supermarket takes a lot of customer’s time in form of waiting. The bar

code has to check and scan each individual item before a customer pays. If

RFID tags are used in place of bar codes then RFID tags can be detected

remotely by radio receivers. If all the items in a customer’s basket have

RFID tags, then all it need to do is push the shopping basket under such a

receiver. It will remotely detect every item in the basket. RFID tags will

reduce the customer’s waiting time in queues and hence supermarkets which

install RFID tags can attract more customers than their slower-to-innovate

rivals.

3.3 New Service Development Cycle

After considering innovations as input to NSD cycle, the cycle as shown in

Figure 3.4 enters into planning stage, which is comprised of

Design : Formulation of new services, objective / strategy, Idea

generation and screening and Concept development and testing

Analysis: Business analysis and Project authorization

After planning stage, cycle enters into execution stage which is comprised of

Development: Service design and testing, Process and system design

and testing, Marketing program design and testing, Personnel

training, Service testing and pilot run and Test marketing

Full launch: Full-scale launch and Post-launch review

The steps involved in all the stages; design, analysis, development and full launch

are described in Figure 3.5, 3.6, 3.7 and 3.8 respectively.

FIGURE 3.4 NEW SERVICE DEVELOPMENT CYCLE

FIGURE 3.5 NSD CYCLE: DEVELOPMENT STAGE

Development

Formulation of new service objective /strategy

• Align service strategy with organization’s overall strategy • How customers value new service and how customers evaluate

competing services

Idea Generation

Gather ideas from customers, employees, customers complaints & feedback, stakeholders and competitors

Idea screening

Only viable & promising ideas considering corresponding potential profits are separated & selected from all gathered ideas

Concept development and testing

− Service concept, which is the description of benefits, solutions and value which a service is supposed to provide, is developed

− Concept testing is done to determine potential customer’s response to service concept

− Test whether new service designed will meet unmet demand − Have customers understood the idea of proposed service so that they

can evaluate the service on the basis of value & benefits

FIGURE 3.6: NSD CYCLE: ANALYSIS STAGE

Analysis

Business Analysis

→ Economic viability of new service after concept testing → Whether there is large enough market & if yes then whether service

will be able to generate reasonable profits? → Revive projections & cost analysis are done, which is recommended

to top management for implementation, if found viable.

Project Authorization

Approval of top management Allocation of resource for the design of new service and

implementation of service delivery system

FIGURE 3.7: NSD CYCLE: DESIGN STAGE

Design

Service design and Testing

→ Detailed description of service with specific features and characteristics of the service

→ It is also important to analyze and present how new service would be different from competitors

→ The whole set of service features require all the functional areas to work in parallel

Process and System design and Testing

− As we know service can be treated as a process and product both. − So each service process in new service is fuelled with quality and value − Each new service process is design by capturing the following points

1. Whether customer will be in direct contact with service employee or not.

2. Participation of customers in service production 3. Degree of customization 4. Facilitating goods and equipment’s in service delivery

Personal training

− Employee selection & training is done regarding serving customers

Marketing program design and testing

− Develop and test marketing program for introduction, sales and distribution of new service with potential customers

Service testing and pilot run

− Offer service on a limited basis with live testing − Determine customer acceptance & information from firsthand knowledge &

make necessary refinements in service accordingly

Test Marketing

− Investigate the salability of the new service by offering service on a limited basis but larger scale than pilot run

FIGURE 3.8: NSD CYCLE: FULL LAUNCH STAGE

3.3.1 NSD Cycle: Service Delivery System

Service delivery system is a very important component while designing & delivery

of new service as shown in Figure 3.9. The elements of service delivery system are

1. People: Organize people into cross-functional teams

2. Technology: Use appropriate tools and resources for planning and

execution

3. System: Develop organizational culture that facilitate the entire

service delivery process so that products can be developed quickly

and effectively.

Full launch

Full Scale Launch

→ Service is offered to entire market

Post launch review

− Determine the degree of achievement of the objectives − Conduct reviews at regular intervals by taking inputs from customers,

employees. − Make improvements in the new service as per the changing conditions

if any

FIGURE 3.9: NEW SERVICE DEVELOPMENT CYCLE WITH SERVICE

DELIVERY SYSTEM

3.4 Service Delivery System Design: Service Blueprinting

Service blueprinting is a technique to design service delivery system as shown in

figure 3.10.

A customer focused approach for service innovation and service

improvement

Helps in visualizing the service processes and hence provide a bird’s-eye

view of the service system

Identifying points of customer contact with service system

Physical evidence associated with services from customer’s perspective

Line of Interaction

Line of Visibility

Line of Internal Interaction

FIGURE 3.10: BLUEPRINT - TESTING OF THE SERVICE CONCEPT

Physical Evidence

Customer will see and experience

Customer initiated steps, choices and interactions during the process of

purchasing consuming and evaluating service

On stage contact person

Actions in the full view of customer

Back stage contact person

Actions not seen by customer

Support process

Capacity requirement of the back office system

Connects the support processes throughout the organization as shown in

Figure 3.11.

In place of costly implementation of pilot studies, blueprints allow the

creation, study and testing of services conceptually on a paper. See one

example of hotel blueprint in Figure 3.12.

FIGURE 3.11: COMPONENTS OF SERVICE BLUEPRINT

EXAMPLE 3.12: SERVICE BLUEPRINT OF A HOTEL

3.4.1 Service Blueprint Advantages

In the service blueprint we can visually see the activities which need direct

customer contact and which activities are back-office activities. This

information can be utilized to provide appropriate training to employees and

to develop good communication skills.

Service blueprint can also enhance the quality and efficiency. It gives a good

scope to determine potential areas where service failure may occur, hence

failure mode analysis can be performed.

Service Blueprint facilitates problem solving and creative thinking and

hence a good tool to innovate in services.

Considering quality issues right at the design stage will help in avoiding

quality losses or service failure later.

It provides a service process structure which can help in devising different

approaches for service system design appropriate for different types of

service organizations

Blueprint provides a common platform for all stakeholders to participate in

the process where everybody gain insights into how their roles fit into the

integrated whole, which facilitate innovation.